Posted on: October 22nd, 2013
The United States Postal Service announced proposed price changes, including an increase in the price of a First-Class Mail single-piece letter from 46 cents to 49 cents. The proposed changes, which would go into effect in January 2014, are intended to generate $2 billion in incremental annual revenue for the Postal Service.
In a letter disseminated to customers, Board of Governors Chairman Mickey Barnett described the “precarious financial condition” of the Postal Service and the “uncertain path toward enactment of postal reform legislation” as primary reasons for seeking price changes above the CPI increase.
“Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges,” said Barnett in the letter. “However, if these financial challenges were alleviated by the timely enactment of laws that close a $20 billion budget gap, the Postal Service would reconsider its pricing strategy. We are encouraged by the recent introduction of comprehensive postal reform legislation in Congress, and despite an uncertain legislative process, we are hopeful that legislation can be enacted this year.”
Except in exceptional or extraordinary circumstances, postage price increases are capped at the rate of inflation as measured by the CPI-U. The Postal Service is filing a price increase above CPI-U due to extraordinary and exceptional circumstances which have contributed to continued financial losses. The Postal Service recorded a $15.9 billion net loss last fiscal year and expects to record a loss of roughly $6 billion in the current fiscal year, and has an intolerably low level of available liquidity even after defaulting on its obligation to make prefunding payments for retiree health benefits.
A “self-supporting” government enterprise, the U.S. Postal Service is the only delivery service that reaches every address in the nation: 152 million residences, businesses and Post Office Boxes. The Service relies exclusively on the sale of postage, products and services to fund its operations. With more than 31,000 retail locations, the Postal Service has annual revenue of more than $65 billion and delivers nearly 40 per cent of the world’s mail.